The GST isn't a magic pudding - Capital Hill, 3 November

Posted by Andrew Leigh Mp48sc on November 03, 2014

With plenty of speculation around about the Abbott Government's plans on the GST, I joined Capital Hill to talk about the implications of changing any one state's share of the pie. Here's the transcript:

E&OE TRANSCRIPT

ONLINE INTERVIEW

ABC CAPITAL HILL

MONDAY, 3 NOVEMBER 2014

SUBJECT/S: GST distribution; interest rates

LYNDAL CURTIS: Joining me now is the Shadow Assistant Treasurer and Member for Fraser, Andrew Leigh. Andrew Leigh, welcome to Capital Hill. Do you believe Western Australia has a real problem?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Well Lyndal, certainly all states and territories are struggling after the $80 billion cut to health and education that Tony Abbott delivered in his last budget. That has made it harder for the states and territories – whether they be governed by Labor or Liberal governments – to make ends meet.

CURTIS: But Western Australia had a problem even before that; it's been complaining about this for some time.

LEIGH: There's a strong case being made by the Western Australian members of parliament. But the problem is that Tony Abbott wants to have it both ways. He wants to send smoke signals out in the west that he's open to giving them a greater share of the GST, but then to say to people in the east that they won't lose out. But Lyndal, the GST is not a magic pudding. If one state gets a larger amount, then it is either because another state has got a smaller amount, or because they've raised the rate or the base.

CURTIS: But if I could go back to my original question: do you think that WA has a problem? That it's not getting to keep enough of its GST?

LEIGH: Well I think the chief challenges for Western Australia are through the Coalition's budget cuts. Really, Mr Abbott's budget – which has been bad for so many Australians – has also hurt Western Australia.

CURTIS: So WA didn't have cause to complain before the last budget, but might have now?

LEIGH: Their main issue ought to be with the impact of this budget, which is making it so much harder for states to meet the rising cost of schools and to meet the demands on their hospital systems, which we know will only grow if Tony Abbott gets his way with the $7 GP tax. That'll end up seeing more people doing into hospital and more pressure on state budgets through increased hospital spending. Tony Abbott, I think, wants to run this kind of magic pudding line for the GST as long as he can – running around the country campaigning to be Bunyip Bluegum – maybe Joe Hockey can be Sam Sawnoff – rather than having an honest, straightforward debate with Australians that if he wants to increase one state's share, then other states will see a higher GST or smaller revenue share.

CURTIS: But isn't that exactly what he put on the table during his Henry Parkes Oration about a week ago? That he wants a measured debate about the federation, including indirect taxation?

LEIGH: Lyndal, there's only a few indirect taxes. We're talking about fuel taxes, which Mr Abbott has increased; wine taxes; car taxes; and the Goods and Services Tax...

CURTIS: But hasn't he called for what you just suggested? A measured debate on a tax like the GST and whether it should be either increased or broadened?

LEIGH: Well, certainly I believe Mr Abbott wants to increase or broaden the GST, and I suspect that he's gingering up people like Denis Napthine – in the event that he is to win re-election in Victoria – to support him in a campaign for a higher GST. Labor doesn't believe that is a good idea. The GST is a regressive tax which hits the poor hardest. We've just seen a big rise in inequality over the last generation as well as a budget which has hit the vulnerable the hardest.

CURTIS: But you could, couldn't you, do what you did with the carbon tax, which is either increase the rate of the GST or broaden the base and then give compensation to lower income earners?

LEIGH: Frankly, if anyone thinks lower income earners are going to come out well from an Abbott tax reform, then I've got a bridge you might like to buy.

CURTIS: But it is possible, on the example of the carbon tax and indeed, the example of the original GST, that you can compensate for, or offset, the regressive nature of the carbon tax.

LEIGH: Possible in theory, impossible in practice, I suspect, Lyndal. This is a government which has been focused entirely on measures which hurt the most vulnerable. You've got single parents on $65,000 a year losing $6,000 as a result of decisions in the latest budget. You've got decisions on income support, on access to hospitals and GPs, access to universities, which are slamming the most vulnerable in the community. That's why Labor is absolutely committed to the pledge we made before the election: that there should be no change to the base or rate of the GST. Mr Abbott made that promise too, 33 times. But already he is walking away from it, as he's done with so many of his other promises. It's just disappointing to me, Lyndal, that Mr Abbott doesn't seem able to do the year after the election what he said he'd do while campaigning to be Prime Minister.

CURTIS: One final issue: the Reserve Bank will meet tomorrow to talk about interest rates. Do you think we're likely to see interest rates continuing to be kept on hold?

LEIGH: Certainly that's the market assessment for interest rates. There's more uncertainty now in the United States with quantitative easing coming off, but also, I think, people have ongoing concerns over the Chinese housing market and the state of the European economies. So they will be weighing on the minds of Reserve Bank policymakers, as will the ongoing question about house prices in Australia and the sustainability there.